Strata insurance – where are we at?
BC strata corporations have faced skyrocketing insurance premiums and in some cases were unable to obtain insurance in the past few years.
In response to concerns, the Insurance Bureau of Canada (IBC) created a National Commercial Insurance Task Force to investigate causes and recommend solutions.
The Real Estate Board of Greater Vancouver participated as a stakeholder at a March 2020 IBC roundtable and in meetings with the BC Financial Services Authority.
Roundtable participants included representatives from the insurance industry, condominium/strata corporations, small businesses, real estate, and construction as well as risk experts.
The IBC has released its midterm report. Here’s a summary.
Factors causing high insurance rates
- Location of properties: buildings are in areas at high risk of earthquakes, floods, and/or fire cost more to insure.
- Increased costs: building values and construction have risen in recent years – and so have replacement and repair costs, which affects the costs of insurance claims.
- The number of unoccupied units or tenants: stratas with many unoccupied units are often not maintained as effectively or repaired as quickly as those that are occupied by unit owners.
- Cost of delays in municipal permitting: delays and backlogs in the municipal permitting process in greater Vancouver extend the time it takes to repair and rebuild properties after insured losses. Insurers must cover additional costs associated with these delays, such as additional living expenses, which can last months or even years.
Concerns identified at the roundtable
The need for:
- mandatory training for strata corporation boards and council members on reserve funds and on implementing a risk management strategy;
- better training of condominium and strata managers;
- stronger regulations governing reserve funds and depreciation reports to ensure better maintenance and repair of stratas;
- ways to reward strata corporations with no/few claims with lower premiums;
- better data collection on finances and risk management challenges;
- and a standard unit definition so strata corporations and unit owners understand their responsibilities.
Solutions identified at the roundtable
The need for:
- improving communications and information sharing;
- a definition of a standard unit in legislation;
- amending building codes to reduce risk; making mandatory risk management education for condominium/strata board members; mandating the licensing of condominium/strata managers;
- mandating depreciation reports and enhancing regulations governing the use of reserve funds; capping loss assessments for strata lot owners; and speeding up municipal permitting processes.
Solutions for insurers
- Educating insurance representatives and condominium/strata associations about risk management best practices;
- Sharing information and research with governments on risk and regulatory reform;
- and Educating condominium boards/strata councils, unit owners and prospective owners about risk management and insurance pricing.
Did you know?
In 2016, the Canadian insurance industry experienced a loss of $5.1 billion, the highest-ever natural catastrophe loss for one year.
Subsequent losses include $1.23 billion in 2017, $2.1 billion in 2018 and $1.4 billion in 2019.
Read the IBC Interim report (opens 20-page pdf).